Morning Note: Market News and an Update from Inditex.

Market News

Brent crude has risen above $99 a barrel, reaching its highest level in nearly seven weeks and approaching the key $100 threshold after Iran said it had struck two American vessels and eight oil tankers in the Gulf. The escalation heightened concerns over further disruptions to global oil supplies. Tehran also launched ballistic missiles toward Jordan. This came after US forces destroyed five Iranian tankers carrying crude following two failed ballistic missile attacks on an American Navy warship in consecutive days.

Money markets are pricing in over 50% probability of a Fed rate hike at the September 15–16 meeting. The yield on the 10-year US Treasury is 4.80%, while gold is trading around $4,400 an ounce. The yen strengthened for a third day after US Treasury Secretary Scott Bessent challenged traders to bet against the currency, citing his insight into what the Bank of Japan will do.

US equities slipped last night – S&P 500 (-0.6%); Nasdaq (-0.3%) – although the Philadelphia Semiconductor Index rose 1.3%. In Asia this morning, equities markets were mixed – Nikkei 225 (-0.2%); Hang Seng (-0.3%); Shanghai Composite (+0.3%); Kospi (+1.4%) – with chip stocks extending their recent gains on sustained investor interest in the AI trade.

The FTSE 100 is currently 0.2% lower at 10,789, while Sterling trades at $1.3560 and €1.1650. UK food inflation is forecast to reach nearly 4% by Christmas before peaking in July 2027, according to the Food and Drink Federation, driven by higher energy costs, a widespread UK drought, and the prospect of a supersized El Niño disrupting global weather patterns.

The US moved to ban some Canadian dairy, auto and alcohol imports, while slapping new tariffs on others. Donald Trump said he would also seek to bar the country’s companies from selling to government contractors.

Source: Bloomberg

Company News

Inditex has today released results for the financial half-year to 31 July 2026. Although sales rose by 9%, operating profit came in 3% below market expectations. The company highlights the second half of the financial year has got off to a good start driven by well received new collections. In response, the shares have been marked down 3% in early trading.

Inditex is the world’s leading apparel retailer, with annual sales of almost €40bn. Through brands such as Zara, Pull&Bear, and Massimo Dutti, the group has 5,444 managed and franchised stores and a strong online presence.

The company’s strategy based on fast fashion at attractive prices has met with headwinds on environmental grounds and, in response, the group has transformed towards a fully integrated, digital, and sustainable business model. Inditex operates in 215 markets with low market share in what is a fragmented sector. Optimisation of stores is ongoing, and the company expects this to drive further gains in store productivity. The growth of annual gross space in 2026 is expected to be around 5%, accompanied by positive net space contribution and strong online sales.

In the six months to 31 July 2026, Spring/Summer collections were “very well received” by customers. Retail Optimisation activities (refurbishments, relocations, new openings, and absorptions) have been conducted in 51 markets over the period.

Sales grew by 9.2% in constant currency to €19.8bn, with a ‘satisfactory development’ both in stores and online.

Gross profit increased by 8.3% to €11.6bn and the gross margin rose by 40 basis points to 58.7%. The group has continued to ‘rigorously’ manage its operating expenses, although including all lease charges, expenses grew 50 basis points above sales growth. Net income increased by 6.8% to €3.0bn.

Due to the robust operating performance, inventory was 9.3% higher as of 31 July and is considered to be of high quality. Free cash flow generation was strong, rising from €1.2bn to €2.4bn, and the group ended the period with net cash of €10.4bn, up 4%.

The final dividend of €0.875 will be paid on 2 November, leaving a full-year payout of €1.75 (3.2% yield), up 4% on last year.

In the current quarter, between 1 August and 7 September, store and online sales rose by 9% year on year and Autumn/Winter collections were “very well received” by customers.

The increase in annual gross space in 2026 is expected to be around 5% with a positive net space contribution, in conjunction with strong online growth. Ordinary capital expenditure is expected to be €2.3bn in 2026 and the gross margin is expected to be stable (+/- 50 basis points).

Source: Bloomberg